TaxRemedies NIRC

On-Line Bar Reviewer
on Taxation
Reynaldo G. Geronimo
Partner
1
ChanRobles Internet Bar Review : ChanRobles Professional Review, Inc.
www.chanroblesbar.com : www.chanroblesbar.com.ph
Tax Remedies
Under the NIRC
(Administrative Level)
2
What is meant by tax remedies?
The term tax remedies refers to the
actions and processes that the
Government may undertake to enforce the
collection of legitimate taxes and those
that taxpayer may take or pursue in order
to resist the payment of what he considers
are unlawful taxes.
3
At which stage of taxation, does the
subject of Tax Remedies come in?
The subject of Tax Remedies comes in
the last stage, namely, at the stage or
phase of Collection, after the earlier stage
of Levy.
4
General Outline
A. Peacetime preparation for battle
B. Actual Combat
1. Opening moves
2. Middle Game
3. End Game
C. Clearing the battlefield
5
A.
Maneuvers of Taxpayer
and
Government during peace time
6
Setting up the taxpayers positions
1. Taxpayer Registers with the RDO.
Every person subject to any internal
revenue tax should, after securing his
Taxpayer Identification Number, register
once with the appropriate Revenue District
Officer (a) within 10 days from
employment or (b) on or before
commencement of business, or (c) before
payment of any tax due or upon filing of a
return, statement or declaration as
required by the Tax Code.
7
He must pay upon registration, and
annually thereafter on or before 31
st
of
J anuary, the annual registration fee (P500)
for each and every separate or distinct
establishment or place of business and for
each type of internal revenue tax for wich
he is obligated.
Exempted from registration fee are: (a)
cooperatives, (b) individuals earning
purely compensation income, (c) overseas
workers.
8
2. Taxpayer keeps Books of Accounts
a. Kinds: (i) must maintain journal and a
ledger; (ii) may maintain subsidiary books
b. Form: (i) if quarterly gross sales, etc. do
not exceed P50,000, use Simplified Set of
Bookkeeping records authorized by Sec.
of Finance; (ii) if quarterly gross sales is
over P150,000, books must be audited
yearly by a CPA
9
c. Language: (i) must be in the native
language, English or Spanish; (ii) in
addition, may be in another language,
but translation must be kept. Keeping of
such books in any language other than
native language, English and Spanish is
prohibited.
d. Duration of preservation: 3 years from
date of last entry.
10
Govt setting up its own position
1. Issues the Taxpayers Identification
Number or TIN;
2. Accepts the registration;
3. Inspects/ examines the books of
account; for income tax purposes,
inspection is done only once a year,
except in cases of:
a. fraud, irregularity or mistake as
determined by Commissioner;
b. taxpayer requests reinvestigation
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c. Verification of compliance with
withholding tax laws and regulations;
d. Verification of capital gains tax
liabilities;
e. In the exercise of the Commissioners
right to obtain information from other
persons;
Examination and inspection shall be done
in the taxpayers office, or place of
business, or in the office of the BIR.
This examination is made under a Letter
of Authority.
12
Powers of the Commissioner to
ensure collection of proper tax
1.Power to interpret the provisions of the Tax
Code and other tax laws- under the exclusive
and original jurisdiction of the Commissioner,
subject to review by the Sec. of Finance;
2. Power to obtain information and to summon,
examine and take testimony of persons;
3. Authority to conduct inventory-taking,
surveillance and prescribe presumptive gross
sales and receipts;
4. Authority to terminate taxable period;
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5. Authority to accredit and register tax
agents;
6. Authority to prescribe additional
procedural or documenary requirements in
connection with the submission or
preparation of financial statements
accompanying the tax returns.
Duty to ensure the provision and
distribution of forms, receipts, certificates
and appliances and acknowledgment of
payment of taxes.
14
Under the ideal situation, as a result of the
positioning by the taxpayer and the
Government,
The taxpayer computes for himself his on tax
liability correctly and, to inform the
Government of his calculations, files the
required internal revenue return and pays the
tax;
The Government receives the money, and
hopefully, spends it properly.
15
The conflict begins when:
Either the Government believes the
taxpayer paid less that what should have
been paid,
Or the taxpayer believes he had paid or
been made to pay more than what he is
required under the law to pay.
16
I
Shots Across the Bow
17
How does the Govt initially try to
collect the right amount of tax?
When the Commissioner or his duly
authorized representative finds that proper
taxes should be assessed, he must first
notify the taxpayer of his findings.
This is called a pre-assessment notice
(PAN).
18
When is a pre-assessment notice
of PAN not required?
A PAN is not required:
When the finding for any deficiency
tax is the result of mathematical error
in the computation of tax as appearing
on the face of the return;
When a discrepancy has been
determined between the tax withheld
and the amount actually remitted by
the withholding agent;
19
When a taxpayer who opted to
claim a refund or tax credit of
excess creditable withholding tax
for a taxable period was determined
to have carried over and
automatically applied the same
amount against the estimated tax
liabilities for the taxable quarter or
quarters of the succeeding taxable
year;
20
When the excise tax due on excisable
articles have not been paid;
When an article locally purchased or
imported by an exempt person has been
sold, traded or transferred to non-exempt
persons.
21
What should the preassessment
notice contain?
The taxpayer shall be informed in writing
of the law and the facts on which the
preassessment notice was based.
The taxpayer shall be required to respond
to the said notice within 15 days from
receipt and invited to an informal
conference at the Revenue District Office.
This is called a Preliminary Conference.
22
II
The Start of the
Actual Shooting
23
How does the Government start the
enforcement of the duty to pay
internal revenue taxes?
When the Government believes that the
taxpayer did not pay or paid less than
what he should have paid in taxes, the
Government issues an assessment
which is a written notice and demand for
the settlement of a due tax liability that
is definitely set and fixed therein.
24
Contents of an assessment
An assessment must contain:
Notice to the taxpayer stating the
amount that is due from him;
Demand to pay the said amount
on or before a certain date.
25
Examples of what are NOT assessments
An affidavit, which was executed by the
revenue officers stating the tax liability of
the taxpayer and attached to the criminal
complaint for tax evasion is not an
assessment.
A letter transmitting the computation by a
revenue officer of the liability and giving
the taxpayer an opportunity to disprove the
findings is not an assessment.
26
What is the presumption regarding
the correctness of an assessment?
Assessments are prima facie presumed
correct and made in good faith. In the
absence of proof of any irregularities in
the performance of official duties, an
assessment will not be disturbed. The
mere failure to present proof of error
justifies judicial affirmation of an
assessment.
27
Within what period may the
Government issue an assessment?
Generally, internal revenue taxes must be
assessed within three (3) years after the last
day prescribed by law for the filing of the
return. A return filed before the last day shall
be deemed filed on the last day. A return
filed after the last day shall be considered
filed on such day of actual filing.
28
When may assessments be issued
and the tax collected even beyond
the 3-year prescriptive period?
Exceptions to the prescriptive period
are:
1. In case of a (a) false or fraudulent
return with intent to evade tax or (b)
failure to file a return, the tax may be
assessed (and a collection case may
be filed in court) at any time within 10
years after the discovery of the falsity,
fraud or omission
29
2. If, before the expiration of 3-year
prescriptive period, the Commissioner
and the taxpayer agree in writing to
its assessment after such time, the
assessment may be made within the
agreed period or its agreed
extensions.
30
In what other instances is the
prescriptive period to assess and
collect suspended?
During the time that the Commissioner is
prohibited to do so and for 60 days thereafter;
When the taxpayer requests for a
reinvestigation which is granted by
Commissioner;
When taxpayer cannot be located in the
address stated in the return, when taxpayer is
out of the Philippines, and, as for collection
only, when no property can be located.
31
What is the effect of the Governments
failure to issue an assessment within
the proper period?
No proceeding in court without assessment
for the collection of taxes shall be begun
after the expiration of the three (3) years after
the last day prescribed for the filing of the
relevant tax return.
32
What is the effect of the neglect or
refusal of the taxpayer to pay an
internal revenue tax after demand?
The tax due becomes a lien in favor of the
Government from the time when the
assessment was made by the Commissioner
until paid, with interests, penalties, and costs
that may accrue in addition thereto upon all
property and rights to property belonging to
the taxpayer.
33
What is the effect of the tax lien on
third parties?
The lien shall be not be valid against any
mortgagee, purchaser, or judgment creditor
until notice of such lien shall be filed by the
Commissioner in the office of the Register
of Deeds of the province or city where the
property of the taxpayer is situated or
located.
34
III
The Exchange of
Heavy Artilery Fire
35
What are the remedies that the
government may take to enforce
collection of taxes?
Administrative proceedings: distraint
(constructive and/or actual) of
personal property and/or levy of real
property
J udicial action: civil or criminal action
36
What is the remedy of the taxpayer
who does not agree with the tax
assessment?
Before payment: Dispute the assessment
within 30 days from receipt; if protest is
denied or unacted upon within 180 days
from the Commissioners receipt of all the
papers, taxpayer may appeal to the Court
of Tax Appeals within 30 days from receipt
of decision or lapse of the 180-day period.
37
2. After payment: Taxpayer may claim for
a refund within two (2) years from date of
payment; if claim is denied, or is not acted
upon within the said two year period, the
taxpayer may appeal to the Court of Tax
Appeals through a Petition for Review
within 30 days from receipt of the denial,
or, if the refund was not acted upon,
appeal to the Court of Tax Appeals prior to
the expiration of the 2-year period.
38
IV
Surrender of the Taxpayer
39
What are the administrative
remedies of the taxpayer against
the collection of taxes?
The taxpayer may offer to compromise his
civil and criminal liability (except for those
where a case has already been filed and
those involving fraud) on grounds of (a)
doubtful validity of assessment, and/or (b)
clear inability to pay;
40
The taxpayer may also ask for abatement
upon showing that (a) tax has been
unjustly or excessively assessed and/or (b)
cost of collection does not justify collection
41
Thank You
and
Good Luck
42

TaxRemedies NIRC

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